Top 9 Disadvantages of Small Scale Production

In small scale production, per unit cost of production increases because there is a high cost of labour. As a result, commodities go costly.

2. Lack of Division of Labour:

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In the small scale concern, the size of production is small. This can be looked over by a few persons. Therefore, there arises no question of division of labour.

3. No use of By-Products:

Small scale production cannot make use of by-products which are there in the process of production. It gives the problem of more wastages of resources.

4. Less Loans:

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Small scale concerns cannot enjoy the economies of finance. They have to operate their concerns with a small capital. There is always scarcity of capital to such business concerns.

5. Lack of Research:

Small scale entrepreneurs have limited resources at their disposal, they cannot spend much in the sphere of science and technology. Thus, these become a hurdle in the way of technical research. A country is deprived of latest technology which means backwardness.

6. Less Competitive Power:

Since, the small scale entrepreneurs have limited resources at their disposal, they cannot make use of modern techniques of production. They have to produce with out-dated machines and tools. The per unit cost of production becomes high. Therefore, they cannot compete with their counter partners, especially in the international market.

7. Inability to Face any Crisis:

Small scale production lack capital and other means of production are common. If the price of the product falls or there is any other type of economic crisis, they find themselves unable to face it.

8. High Rate of Interest:

Small scale producers get capital at a higher rate of interest as they have less creditability in the market. This leads to increase in cost of production and higher price of their production.

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9. Defects in Marketing:

Small scale industries cannot spend much on advertisement. Therefore, their sales cannot be adequately encouraged. They fail to attain the various market benefits.